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HONG KONG, March 29 (Reuters) - Li & Fung Ltd,
which supplies clothing and other products to retailers around
the world, on Wednesday reported a 47 percent fall in 2016 net
profit and said tough conditions in the global retail industry
would put pressure on its business.
Li & Fung, which made its name by making clothing and toys
for Western retailers, is battling a difficult economic climate
as well as competition from online rivals.
The company said in a statement a highly promotional
environment was likely to continue in all markets, and retail
destocking would persist.
"I expect an unprecedented number of bankruptcies and store
closures in the years to come," chief executive officer Spencer
Fung told a news conference, referring to the global retail
industry. "I remain cautious as (the) operating environment is
The group said it aimed to achieve low double digit growth
in revenue and core operating profit by 2019.
Li & Fung said an immediate first step to improve its
performance was to reorganise the company into two parts, one
focused on services and the other on products.
CEO Fung said the company had no plans to spin off any part
of its business at present but would continue to simplify its
Li & Fung said its net profit for 2016 fell to $223 million,
from $421 million a year earlier, missing expectations.
Analysts were expecting a profit of $246 million, according
to Thomson Reuters SmartEstimate data.
Revenue fell 11 percent to $16.8 billion from a year
earlier, while core operating profit dropped 19.6 percent to
Li & Fung has refocused on its core supply chain business
following the sale of its loss-making brand-licensing and
distribution business in 2014, which helped to increase its cash
flow and control operating costs.
Li & Fung's shares closed 0.5 percent lower ahead of the
earnings announcement, lagging a 0.2 percent rise in the
benchmark Hang Seng Index.
Hong Kong's stock index compiler in February said it would
remove Li & Fung as a constituent of the Hang Seng Index,
replacing it with Geely Automobile Holdings Ltd,
sending Li & Fung's shares to a 14 year low.
(Reporting by Donny Kwok; Editing by Randy Fabi and Jane